Cash rent leases must work for both parties

Cost of production information vital

By Jean Caspers-Simmet

simmet@agrinews.com

SIBLEY, Iowa -- Cash rent leases need to benefit both landowners and renters, says Ron Hook, Iowa State University Extension farm management specialist in Sibley.

"The landowner has to be concerned about how the land is maintained in order to keep its value, and the tenant needs to be able to make a necessary amount of profit in order to stay in business,'' Hook said.

Good lease agreements often lead to long-term relationships between both parties, he added.

Profits and losses vary from year to year and expectations of future returns are bid back into land rents and land selling prices, said Iowa State University Extension economist William Edwards.

Yields were at record levels in many parts of Iowa in 2002, but people have to be realistic when negotiating rental rates in the coming months.

"We're not likely to get a repeat of last year,'' Edwards said. "I'd caution against factoring those yields into bids on cash rent.''

Edwards said producers need to know their own cost of production when negotiating rental rates.

"Just because your neighbor can afford to pay a certain amount of rent doesn't mean you should,'' Edwards said.

With 60 percent of Iowa's farmland rented out by its owners, and 40 percent of farmland rented under cash rental lease agreements, many operators have multiple landlords.

"It's important to communicate with each landlord,'' Edwards said. "That's a time-consuming process, but you've got to keep the partner informed. If people live away from the farm, it's even more important to have good communication. It's also important to take the time to keep separate records on each farm.''

The annual deadline for renewing or ending farm leases is Sept. 1. Under Iowa law the lease continues for the following crop year on the same terms and conditions unless written notice of termination is served upon either party by Sept. 1.